2019 (11) TMI 105

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....f law for our consideration: "Whether on the facts and circumstances of the case and in law, the Tribunal has erred in holding that AO has not recorded satisfaction u/s 14A(2) despite the AO discussing the assessee's method in para 5.3 before not accepting the same? 3. The Respondent is a recognized stock exchange. The Respondent earned dividend income of Rs. 143.39 crore which was exempt under section 10 of the Act. In its return of income for the subject assessment year, the Respondent had disallowed a sum of Rs. 40.29 lakh under section 14A of the Act as an expenditure attributable to the earning of exempt income. However, the Assessing Officer did not accept the claim of the Respondent of disallowance under section 14A of th....

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....d by the assessee are not consistent with the provisions of Section 14A and working of the same, as envisaged in Rule 8D of IT Rules. The basis adopted by the assessee for calculation of disallowance under under section 14A appears peculiar as assessee has adopted the total area occupied by the particular section, i.e. , Treasury Section of the assessee out of the total area occupied by the company. This is not a basis by any standard or imagination." On the above basis, it is submitted that non-satisfaction has been recorded of by the Assessing Officer of the disallowance made by the Respondent. Therefore, invocation of Rule 8D cannot be disputed. It also incorrectly placed reliance upon the order of the Tribunal for the assessment year....

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....of his contention, our attention is drawn to the judgment of this Court in the case of Godrej & Boyce Mfg.Co.Ltd. v. Deputy Commissioner of Income-tax (2010) ITR 81 (Bom) while dealing with constitutional validity of Rule 8D of the said Rules, negatived the challenge to its validity by, inter alia, recording as under: "57. Now in dealing with the challenge it is necessary to advert to the position that Sub-section (2) of Section 14A prescribes a uniform method for determining the amount of expenditure incurred in relation to income which does not form part of the total income only in a situation where the Assessing Officer, having regard to the accounts of the assessee is not satisfied with the correctness of the claim of the asses....

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....s in this background that Sub-section (2) was inserted so as to provide a uniform method applicable where the Assessing Officer is not satisfied with the correctness of the claim of the assessee. Sub-section (3) clarifies that the application of the method would be attracted even to a situation where the assessee has claimed that no expenditure at all was incurred in relation to the earning of non-taxable income. 58. Parliament has provided an adequate safeguard to the invocation of the power to determine the expenditure incurred in relation to the earning of non-taxable income by adoption of the prescribed method. The invocation of the power is made conditional on the objective satisfaction of the Assessing Officer in regard to th....